Trading Technology

12:06 PM
Justin Grant
Justin Grant
Commentary
Connect Directly
Google+
Twitter
RSS
E-Mail
50%
50%

SEC Brings Knife to HFT Gunfight

Former lawyers for the largest U.S. securities regulator say the agency is fighting a 21st century battle with 20th century capabilities.

There has been much talk in recent months about how U.S. regulators are stepping up their efforts to better regulate high-frequency trading. We've explored this story from a number of angles this year already, touching on everything from how a newer, bolder Securities and Exchange Commission is preparing to tackle the high-frequency marketplace, to what the global exchanges are doing to fend off abusive high-speed techniques.

But for all the talk about what regulators are preparing to do, a number of former SEC lawyers told the Huffington Post that the nation's largest securities regulator doesn't come close to monitoring even half of the trades that HFTs fire off on a daily basis. And even the measures they're weighing - which we broke down last month – won't be able to effectively regulating high-speed trading.

From Huffington Post:

"It's inconceivable that they can regulate [high-frequency trading]," said Ralph Ferrara, a former SEC general counsel. "There are too many [high-frequency trading] systems; they're all idiosyncratic; they're all different. The SEC is starved for cash, starved for talent. A small-sized hedge fund can outperform the SEC," added Ferrara, who left the commission in 1982 and is now a vice chairman of Dewey & LeBoeuf who specializes in securities law.

Former SEC enforcement lawyer Philip Khinda essentially likens what regulators are doing to someone bringing a knife to a gunfight.

"You've got 21st-century trading strategies and software being monitored by an agency that still only has 20th-century capabilities," said former SEC enforcement attorney Philip Khinda, who left the agency in 1996.

"The commission doesn't have the ability to monitor high-frequency trading, not just in terms of sophistication; it doesn't have the cold hardware to keep up," said Khinda, now co-head of the SEC enforcement practice at Steptoe & Johnson in Washington. "It doesn't have the tools. It's only just begun to assemble them."

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio
Comment  | 
Print  | 
More Insights
More Commentary
Moving the Trader Closer to the Investment Process
The sell side can demonstrate more value by applying analytics to pre- and post-trading, and by educating buy-side clients about broker segmentation, trading behavior and algorithm shortcomings, and more.
Wirehouses May See More Independent BDs as Retention Packages Expire
Retention bonuses are expiring, leaving brokerages vulnerable to attrition. Is access to technology making it easier for brokers to go independent?
SCI: A Whale of a Regulation
The SEC's Reg SCI weights in at a whopping 742 pages. Here is what you need to know about the oversized regulation.
One Size Fits Nobody in End User Services
How building profiles from employees' roles and behaviors can help optimize your end user services.
'Enlightened' Non-IT Execs More Likely To Run Secure Organization
Do senior executives understand their role in data security? On the whole, unsurprisingly, no.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.